A DOZEN-STRONG mission from the International Monetary Fund (IMF) will begin formal discussions with the Government in Dublin today on a rescue package for the State running into tens of billions of euro.
The IMF delegation will include several banking experts who will take part in the discussions with more than 20 officials from the European Central Bank (ECB) and the European Commission.
The fund spokeswoman in Washington, Caroline Atkinson, said the focus of the discussions was “to look at whatever measures might be needed to support financial stability”.
She said talks would include the IMF’s views “on the Government’s budget plans . . . on tax and spending measures.”
Taoiseach Brian Cowen denied that the rescue plan would lead to a loss of Irish sovereignty. He also dismissed suggestions of failure. “I don’t believe there’s any reason for Irish people to be ashamed and humiliated,” he said.
Speaking earlier, Central Bank Governor Prof Patrick Honohan said he expected the talks would result in the Government accepting a “very substantial” loan amounting to “tens of billions” of euro. “The ECB would not send large teams if they didn’t believe first of all that they could agree to a package,” he said.
Mr Cowen indicated that the Government did not share Prof Honohan’s views on the figure or a deal, saying his comments were premature ahead of negotiations.
“The governor gave his view. He is entitled to give his view. I am entitled to give the view about the decision the Government will take when the necessary discussions are over,” he said.
However, Minister for Finance Brian Lenihan later told the Dáil that the Government could accept an aid package for the banks after the talks with the IMF.
He said the establishment of a contingency fund would be a “very desirable outcome” but said no final decisions had been made.
It was possible that the funds would be made available but not drawn down, he added.
In a subsequent interview on RTÉ television, Mr Lenihan accepted that the external assistance from the EU would “have to be funnelled through the State” but denied the IMF would be directing the budget and four-year plan.
He insisted the State’s 12.5 per cent corporation tax would not be jeopardised. “I have always made it clear to all international organisations that it is a red line [issue],” he said.
It was learned last night that making AIB and parts of the other banks more attractive to foreign buyers were among options considered in preliminary talks yesterday.
Initial discussions centred on ways to reduce the size and number of Irish banks which are considered to have grown too big and reliant on ECB funding.
Reducing the size of the banks would improve their ability to borrow from investors and help bolster their reserves to absorb possible further losses, boosting market confidence.
One option being discussed is the possibility of selling off “non-core” assets such as AIB’s UK loan book and Irish Life and Permanent’s UK mortgage book.
To attract buyers, guarantees covering potential losses on the loans could be given, or agreement could be reached to share losses. Such guarantees would be funded by the loans from the IMF and the European stability fund.
The head of the IMF mission is Ajai Chopra, deputy director of the fund’s European department. He arrived in Dublin yesterday accompanied by Ashoka Mody, a banking expert who has written several IMF annual economic assessments on Ireland.
The EU-IMF review is open-ended, but a well-placed EU source said the joint mission aims to finish its rescue plan the weekend after next.
